Today: Ahead of what could be a contentious shareholder meeting, Apple (AAPL) stock gains on rumors that the company will hold a vote to split its stock. Also: Hewlett-Packard (HPQ) and Intel (INTC) also gain in strong day for tech stocks, with the markets enjoying strong economic news.
Apple stock turns around as talk changes from lawsuit to meeting
Tuesday didn't start out pretty for Apple, but by the time the markets closed, the company's stock had rebounded on rumors that will have everyone watching the Cupertino tech giant's annual shareholder meeting Wednesday.
Apple stock continued to trend down Tuesday morning after news that the company had agreed to settle a class-action lawsuit from iTunes users for more than $100 million. The suit stemmed from the ease with which children could make in-app purchases from iTunes on Apple products, which sparked changes in the way users purchase such add-ons along with the civil action. Apple agreed to pay $5 in iTunes credits to the affected parties, which could be quite a few once news of the settlement begins to spread to those not involved in the suit; those who claim more than $30 in credits could receive their payouts in cash.
Apple's gargantuan profits should be able to sustain a few free downloads, however, so shares dipped only slightly. Later in the day, however, the price of Apple stock suddenly started heading back up, and many onlookers pointed to tweets from hedge fund manager Doug Kass intimating a big move for Apple on Wednesday.
"High above the Alps my Gnome is hearing a rumor that Apple will announce a stock split at tomorrow's shareholder meeting," the well-known investor said.
Kass later pulled back on his comments, but the rumor had already caught fire and pushed Apple up as much as 2 percent. Shares calmed back down and closed up 1.4 percent at $448.97.
Nobody knows exactly what to expect at Wednesday's shareholder meeting, which gave some credence to the stock-split rumors. Apple was planning to hold a vote on a trio of proposals bundled together, but activist investor David Einhorn managed to squash that vote with a temporary injunction from a court that found Apple's attempt to have one vote cast for all three proposals was unlikely to stand up in a court battle.
Now, shareholders -- possibly including Einhorn -- are planning to pack in to Cupertino to hear Apple CEO Tim Cook speak, and experts say many are waiting to hear what Einhorn has been pushing for since he started his crusade: plans to push some of the company's stuffed cash coffers back to them. A stock split would be unlikely to actually create value, since it would double the number of shares, but halve the value, and investors are likely seeking something better.
"(Einhorn is) a proxy for other investors saying to Apple: 'Do something with all that cash you have,'" Endpoint Technologies Associates analyst Roger Kay told The Mercury News on Tuesday. "So there's this tension going into the meeting between Apple and the investors Einhorn represents. Tim Cook can't avoid talking about it. This is a huge subject and it's right there on the table for everyone to see."
For live coverage of Apple's shareholders meeting Wednesday, go to www.siliconvalley.com.
Hewlett-Packard and Intel rise on strong day for tech stocks
Apple wasn't the only Silicon Valley tech titan to enjoy a strong day Tuesday on Wall Street, with the SV150 index of the area's largest technology companies gaining 0.7 percent on the backs of its biggest names.
Hewlett-Packard increased 3.8 percent to $19.79, following a historically large increase last week on the strength of better-then-expected earnings. The personal-computer giant's CEO took center stage Tuesday, as Meg Whitman spoke to the Morgan Stanley technology conference and told investors that the company is about halfway through a large round of layoffs aimed at restructuring the company, but that most of the benefits of that move will arrive later in the process. In a surprising move that didn't involve HP, the former gubernatorial candidate also changed sides on an issue that loomed large in her battle against Jerry Brown, signing on to a brief in favor of same-sex marriage and releasing her own statement on the matter.
Intel also had a positive day, increasing 1.7 percent to $20.58 after announcing two new efforts. After markets closed Monday, the Santa Clara chipmaker said that it would begin to make chips for other companies in its factories, starting with Altera; many saw the move as a prelude to eventually fabricating proprietary chips for Apple, which would be a lucrative deal. Wednesday, the company introduced its newest software effort in the field of "Big Data," a tweaked version of its Hadoop software that will compete in a growing field.
Google (GOOG) dropped slightly after announcing that it would offer a Google+ social sign-in for non-Google websites, similar to the Facebook Connect offering that has been in place since 2008. The Mountain View search giant closed with a 0.1 percent decrease at $790.13 while it also battled Spain in Europe's highest court in a debate on data protection. Facebook gained 0.4 percent to close at $27.39 as its mobile photo-sharing app Instagram announced it had reached the member milestone of 100 million monthly active users.
Yahoo (YHOO) didn't seem to be harmed from a firestorm of criticism from CEO Marissa Mayer's decision to suspend the ability of employees to work from home, gaining slightly to $20.76. Sunnyvale's Juniper Networks was not as fortunate, sliding 1.3 percent as Reuters reported that it had failed to sell off part of its business in a restructuring effort, and was starting again with acquisitions in mind.
Wall Street gains overall as economic reports show strength
The rest of Wall Street joined Silicon Valley in the fun Tuesday, with all three major U.S. indexes gaining after strong reports on the U.S. economy, fueling a bounceback session after Monday's losses.
While Federal Reserve chief Ben Bernanke told Congress that the central bank's efforts are paying off with a stronger economy, the housing market and consumers backed him up. The Commerce Department reported that sales of new homes hit the highest point in more than four years, while the Conference Board's Consumer Confidence Index showed that Americans are feeling better about the economy in general.
Overall, economists said that the signs point to a strong year for the U.S. economy, although that is still threatened by the inability of Congress and the president to agree on a rational set of budget cuts that will preserve the country's fragile growth.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Up 13.40, or 0.43 percent, to 3,129.65
The blue chip Dow Jones industrial average: Up 115.96, or 0.84 percent, to 13,900.13
And the widely watched Standard & Poor's 500 index: Up 9.09, or 0.61 percent, to 1,496.94
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.